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Dissent in Nepal over the role of ethnicity in a post-conflict state has put donor agencies under increased scrutiny, with politicians and analysts accusing them of meddling, taking sides and circumventing the government to push an agenda of "social cohesion".

"We got a lot of criticism from all sides. We took the brunt [from all sections of society including marginalized groups, citizens, media and political parties] saying we interfered or didn't do enough," said the director of the UK government's aid arm, Department for International Development (DFID), in Nepal, Dominic O'Neill. DFID is Nepal's largest bilateral donor, recently increasing its annual spending by US$60 million to some $150 million in 2013.

The national debate surrounding an ethnic identity-based federalism - where power is devolved from the national government to local units determined largely along ethnic lines - has been at the core of Nepal's transition to post-war stability, with some politicians, analysts and journalists painting Nepal's international donors as instigators of ethnic tension.

Almost seven years since the country ended a decade-long civil war with a peace deal, efforts to birth a post-war constitution and new government are still stalled amid political infighting, which has only exacerbated the country's ills.

Nepal is one of world's poorest countries with 25 percent of its 30-million people living below the poverty line, according to the World Bank. Pockets of chronic under-nutrition, especially in the country's Far West mountainous region, exceed emergency levels, and access to safe sanitation remains perilously inaccessible for 20 million people.

"Changes are drastically needed in this country, but didn't happen at the pace they were supposed to. Aid agencies got too involved in the peace process, political transition and democratization issues rather than development," political analyst and professor Krishna Khanal told IRIN.

Aid agencies should have been focusing, instead, on building up national institutions rather than duplicating efforts and competing among themselves, Khanal added.

Checks and balances

After years of failed constitution-making, a new interim prime minister was agreed upon on 18 February; Nepal's opposition parties have refused to consider holding elections for a new constituent assembly (the previous one was dissolved in May 2012) under the incumbent Maoist-led regime.

But as recently noted by the UK-based Economist Intelligence Unit, significant hurdles remain "to end the destructive political wrangling. In the meantime, Nepal's civic functions are in effect paralysed and economic activity is depressed".

Robert Piper, the UN resident and humanitarian coordinator in Nepal, told IRIN the current political situation is "naturally of real concern" to donor groups.

The position of chief of the Centre for Investigation of Abuse of Authority (CIAA) and national auditor-general are still vacant after seven years. In addition, there is no Public Accounts Committee - a parliamentary body that tracks spending of donor monies.

"These checks and balances are important in any democratic society," Swiss ambassador to Nepal, Thomas Gass, told IRIN. He is also the chairperson of donor group Nepal Peace Trust Fund.

Similarly, analysts and government officials make the same accountability charges against aid agencies that circumvent the government, directly implementing projects without consultation or approval.

Such a practice has become a de jure modus operandi in a country that has had five prime ministers in the last six years, according to the national umbrella group of more than 5,300 development local NGOs, the NGO Federation of Nepal (NFN). Local elections were last held in 1997, leaving local governance barren, but for the few appointed government caretakers.

Local development programming has withered as the government has been consumed by jockeying for power in Kathmandu, said Gopal Yogi, NFN's vice-president.

"Our crucial concern is lack of locally elected bodies which would make a difference, and in their absence aid agencies are implementing their own projects without any government control."

But even a power vacuum is no justification for going it alone, national officials told IRIN, noting that even amid political turbulence, donors have steady government counterparts. "We have ambitions, but donors' ambitions for us are greater." "Aid agencies believe that it is easier implementing themselves than [going] through the government," said Rabi Sainju, programme director of foreign aid coordination with the National Planning Commission (NPC).

Sainju said the NPC should have the final say over foreign-funded projects due to its responsibility for national development plans and budgeting.

Yet, it is not uncommon for bilateral donors to have a direct agreement with the government and start project implementation without NPC's knowledge due to poor inter-ministerial coordination, he added.

Aid agency defence

Aid agencies say donors are simply carrying out pre-approved programmes with no intention of interference.

"We don't want to be competing with the government in the rural areas. In all of our programmes ,even if our funding hasn't gone through government, 100 percent of our activities are approved by the [national] government," DFID's O'Neill told IRIN.

He explained that existing local government bodies like the District Development Committees (DDC) and Village Development Committees (VDC) have limited capacity and that this reality is unlikely to change soon.

"I was in Humla and Jumla (remote hill villages in the country's northwest) where the [local] government has very limited capacity. In these remote places where the situation is complex and [national] government has no presence, why cannot an external partner deliver services on its behalf?" asked O'Neill.

Meddling or mandate?

But donors' intentions are suspect, say critics, when agencies direct funding towards traditionally marginalized indigenous ethnic groups that rank low in the long-standing feudal caste system, while overlooking the needs of historically privileged "high-caste" communities that are also extremely poor.

O'Neill said DFID's support of certain ethnic groups was in accordance with the 2006* Comprehensive Peace Accord (CPA). "The fact is - yes - we have supported a lot of marginalized groups in the past. Our mandate was to do that and it is in the CPA, section 3.5. It was clear that this was recognized as an issue that needed to be dealt with as part of the peace process."

Donors, including the UN, have funded "social inclusion" programmes to empower historically marginalized ethnic groups, which all sections of society support, say analysts.

Former foreign affairs minister Chakra Prasad Bastola told IRIN last June that while no one disagrees the caste system of preferential treatment and access needs change, foreign donors "are pushing their agenda down our throats", and demanding instant results. "We have ambitions, but donors' ambitions for us are greater."

The problem is not whether, but rather how, donors have supported these groups, said foreign affairs analyst Rajan Bhattarai, head of the Nepal Institute of Policy Studies (NIPS).

"The inclusion [agenda] has been narrowed down to political empowerment, distribution of powers and [job quotas] and anything that has immediate solutions instead of empowering the marginalized people from the bottom level," he said, blaming foreign donors for a too-exclusive focus on dismantling the political basis of the caste system without financing long-term fundamental change.

Impartiality and neutrality

"We don't promote identity federalism. We don't promote territorial federalism. We support Nepal impartially as it explores these difficult questions and tries to find the right formula," said the UN's Piper.

The standards of humanitarian assistance - humanity, neutrality and impartiality - are laid out in a 1991 UN resolution that defined impartiality as providing humanitarian assistance "without discriminating as to ethnic origin, gender, nationality, political opinions, race or religion. Relief of the suffering must be guided solely by needs, and priority must be given to the most urgent cases of distress," while neutrality meant "not taking sides in controversies of a political, religious or ideological nature".

"Once the people of Nepal and the government decide how it wants to progress into whatever structure, then we will support on that basis, but we don't have an opinion on federalism," said DFID's O'Neill.

But even if donors have aimed to remain apolitical, they became dependent on local activists (including the Nepal Federation of Indigenous Nationalities, NEFIN, a local NGO advocating ethnic-based federalism) for implementation, which politicized and tainted their mandate, said Khanal, the analyst.

Some donors perceived NEFIN becoming too political, and a number, including DFID in 2010, withdrew funding.

"Federalism was not an international donor-driven agenda but they [donors] worked too closely with organizations run by radical activists, and that indirectly affected their neutrality," said Khanal.

Donors in Nepal insist they uphold all three criteria of humanitarian assistance in Nepal, even as they push for social inclusion.

Piper said the UN has "very deliberately" worked with the most disadvantaged groups in this country over the last decade and has done so without apology.

"But to go from that statement to the statement that international donors and the UN are, for example, actively promoting federalism, and particularly identity-based federalism, or supporting the 'bandas' [strikes] called by indigenous or marginalized groups, is ridiculous," said Piper.